USO SEGURO Y USO RESPONSABLE

At the dawn of the twenty-first century, the telecommunications industry has a leading position in the world economy. The global market for telecommunications, software, and electronics is expected by some to reach $3 trillion by 2010.

Telecommunications is one of the fastest growing industries in the United States. In 1994, the North American Telecommunications Association (NATA) projected that the telecommunications equipment market, with sales of $52.5 billion in 1992, was growing more than 14.9 percent a year and would reach $103.8 billion in 1997.24 According to a 1999 study conducted by Craig L. Moore, professor in the Isenberg School of

Management at the University of Massachusetts Amherst, the information technology (IT) sector of the economy is growing at a much faster rate than is the national economy as a whole.25

Lynn, Massachusetts, has historically been an industrial city. For most of the past century, General Electric has been its major employer. In the past two decades, however, GE has sharply decreased its operations in Lynn. Though this has contributed to the city’s economic decline, Lynn does have an infrastructure that bodes well for telecommunications development. The primary goal of this study is to show how this economically depressed city may take full advantage of its available telecommunications infrastructure as a tool to promote economic development.

Community Overview

Economic History

The city of Lynn is located 11 miles north of Boston on the north shore of Massachusetts Bay. Lynn was settled in 1629, originally bearing the name “Saugust.” Leather and tanning were its first major industries, and by the mid-

24

COBA –M.I.D, Massachusetts Communications Technology Park Feasibility Study (1994). 25

Moore, Information Technology: The New Foundation, University of Massachusetts Donahue Institute

1700s women’s shoemaking had begun to bring prosperity to the city. A trolley line, opened between Boston and Salem in 1837, encouraged growth of Lynn’s shoe industry. A factory district took hold, surrounded by neighborhoods of boardinghouses to lodge the workers. Lynn developed into a “shoe town,” eventually becoming the world’s largest producer of women’s shoes.

In 1892, the Edison Company and Thomson-Houston, the nation’s largest electrical companies, merged to create the General Electric Company. GE was one of the first U.S. industries to realize the need for on-the-job training to

guarantee an adequate supply of skilled workers. The Apprentice School, formed in 1902, graduated thousands.

During World War II, GE grew rapidly in response to orders for armaments; the Lynn plant produced the first jet engine built in the United States in 1942. For the next three decades the company, and the city, depended heavily on military contracts. In the 1980s, however, GE began downsizing its operations in Lynn and moving them overseas, a trend that continued through the nineties. This decline in the city’s manufacturing base has taken a heavy toll on the city’s economy. Today, like many industrial cities and towns in New England, Lynn is struggling to recapture the strong economy it enjoyed in the industrial age.26

Lagging on the Socio-Economic Scale

According to 1990 Census statistics, Lynn falls below both state and national averages for median household income: $28,553 for the city, in contrast to the state median of $36,952 and the national median of $30,056. Nearly 45 percent of the city’s families had incomes below $25,000 (see Figure 1).

26

Figure 1

Income Distribution in Lynn, 1990

(Median Household Income: $28,553)

Number of Households Percent of Total

Less than $5,000 2,102 6.7 $5,000 - $9,999 4,435 14.1 $10,000 - $24,999 7,476 23.7 $25,000 - $34,999 4,444 14.1 $35,000 - $49,999 5,687 18 $50,000 - $74,999 5,133 16.3 $75-000 - $99,999 1,562 5 $100,000 or more 551 1.7 Source: 1990 US Census Educational Attainment

Once again, education is an important requisite for taking advantage of a new opportunity, this time the telecommunications infrastructure in Lynn. The percentage of Lynn residents with college or advanced degrees is lower than the national average and lower still than in Massachusetts as a whole.

Figure 2

Educational Attainment in Lynn, by Percent of Population 25 and Older

Less than High School High School Degree Some College or Two-Year Degree Bach elor’s Degre e Professional or Graduate Degree

25% 30% 25% 13% 7%

20% 30% 23% 17% 11%

27% 36% 23% 10% 4%

Unemployment Rate

The unemployment level, an indicator of economic distress, remains high in Lynn: 4.1 percent in 1999, compared to3.2 percent in Massachusetts. There was a similar disparity throughout the past decade: the gap between the city and the state unemployment rates was wider at the end of the 1990s than at the beginning.

Figure 3 - Unemployment Rates, Lynn and Massachusetts

0% 2% 4% 6% 8% 10% 12% 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Lynn Massachusetts

Figure 4 - Lynn, Massachusetts, Employment by Sector, 1985 - 1998 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Government Manufacturing Trade FIRE Services All Others

Source: Commonwealth of Massachusetts, Division of Employment and Training (ES-202 Series)

Note: Due to changes in industry definitions, data prior to 1988 are not strictly comparable to more recent data.

Economic Base

Major Divisions of Employment

The downsizing of General Electric during the 1980s and 1990s affected the distribution of the labor force. The number of employees in manufacturing has decreased by nearly 75 percent since 1985. Upon comparison with the economic base in the state as a whole, however, manufacturing still holds a strong position in Lynn, at 28 percent. Thus, the shift from manufacturing to services is not occurring as it is in the overall state or the nation. The Commonwealth’s

prosperity in the 1990s was driven largely by service-sector growth, while Lynn has experienced a slight decline in service employment since 1985. As

manufacturing declined in recent years, the percent of service-sector jobs has increased, without a real addition to employment in the sector.

In the same period, constant growth has been observed in the small government sector, which has nearly doubled. However, though GE is no longer expanding and its presence has recently been diminishing in Lynn, it still is the city’s

number-one employer, accounting for 24.5 percent of the employment in 1999.27 Figure 5 - 1998 Employment in Lynn by Major Divisions

All Others 5% Services 28% Government 17% Manufacturing 28% Trade 18% FIRE 4%

Source: Commonwealth of Massachusetts, Division of Employment and Training (ES-202 Series) Note: Due to changes in industry definitions, data prior to 1988 are not strictly comparable to more recent data.

Establishment Size

Businesses with fewer than six employees make up the largest part of Lynn’s business sector. (By the USA Small Businesses Association definition of small business for most industries: up to 500 employees, 99.69 percent of firms in Lynn are considered small businesses.) These have the potential to be prime players in the economic revitalization of Lynn.

27

Figure 6 - Distribution of Businesses by Number of Employees 0% 5% 10% 15% 20% 25% 30% 35% 40% 1-5 6-15 16-25 26-35 36-50 51-100 101-500 M ore than 500 N um ber of E m ployees Source: iMarket, 2000

Community Context

History of Technological Penetration into the Community Economy

It is generally recognized that four elements are required for successful utilization of telecommunications in economic development:

1. Infrastructure—the phone lines, satellites, and associated equipment that allow telecommunications to work;

2. Access—a way for the end user to utilize the infrastructure at a reasonable cost;

3. Applications—uses for the telecommunications equipment; and 4. Training and support—to assure that it all works smoothly.28

Lynn has all four of these elements. The city is heavily urbanized and is home to a main Verizon (formerly Bell Atlantic) telephone switching center; Shore.net, a local full-service Internet Service Provider (ISP) that maintains data storage

28

From Dr. Edwin B. Parker’s keynote address on rural telecommunications development, May 14, 1999.

facilities in the Greater Boston area; and Beckles Enterprises, Inc., a Web site design firm. All areas of the city have access to telecommunications services, such as full-service, high-speed broadband Internet, cable, and up-to-date telephone and premium services.

There are plans to lay national and international high-speed cables directly through Lynn, and linking with Boston. Lynn already has more than adequate high-speed access, and improvements over the next couple of years will rank it among the best anywhere. The challenge for Lynn is to take advantage of this opportunity on its own behalf and not to become merely a landing ground for high-speed access to Boston.

Level of Technology

The city is quickly becoming known as a telecommunications hub for New

England, because of recent private-sector developments along with public/private sector collaborations related to telecommunications. These recent events are described in the following sections of the report.

Cyber District

The Lynn Cyber District was created to capitalize on Lynn's advantages as a location where Internet-related businesses can locate and grow. Almost every building in downtown Lynn is within 1,000 feet of Verizon's central switching office. A web of fiber-optic cable running between Boston and northeastern Massachusetts, New Hampshire, and Maine comes together at that office. This means Internet companies based in Lynn can get unusually good access to global networks and—because Verizon charges by the mile for its high-volume data connections to long-distance carriers—at a low price. In addition to this advantage, Lynn offers low commercial rents, about half the price of comparable properties in other cities.

This gives Lynn a niche that was desperately needed. Already, a half-dozen small Internet-related businesses have located in this downtown Cyber District.29

The Lynn Cyber District Council (LCDC) has given the city a focal point for economic development efforts. Its purpose is to identify issues and opportunities for Cyber District businesses, to develop a plan that will recruit and grow Internet- related businesses and increase an overall businesses presence, to create a number of high-skill and high-wage jobs in technology-based industries, and to alleviate blight in downtown Lynn.

National and International Telecommunications Infrastructure

29

Ackerman, Jerry. "Firms find Lynn well-connected to the future." Boston Globe (October 25, 1998): p. G1.

In the past year, negotiations between the city and Worldwide Telecom have resulted in the decision to make Lynn the hub of New England’s first

intercontinental fiber-optic cable, capable of handling 12 million high-speed transmissions simultaneously. Transatlantic communications for Boston and the New England region have previously been routed through New York. Lynn was chosen because of its proximity to Boston, Worldwide Telecom’s primary target area, and because of the city’s inactive port, thus turning a seemingly negative aspect into an asset. The facility operating the cable system will employ

approximately 15 people.

This move will also help to enhance competition for bulk telecommunication access for area ISPs and other telecommunications service providers by giving companies an alternative to purchasing bulk access from Verizon, currently the main telecommunications carrier.30

30

The construction of the transatlantic cable has prompted other companies in Lynn to consider developing telecommunications infrastructure enhancements. One such company, Assets Channel, Inc., is currently in negotiations with the city to connect an eastern seaboard fiber-optic cable to the transatlantic cable. This cable would stretch from Lynn to Miami, Florida, with multiple main connections along the Atlantic coastline.31 Such an infrastructure development could prove very beneficial, not just to Lynn but to Boston and New England as a whole, by increasing the region’s share in the worldwide telecommunications network. Local Internet Service Providers

With 30,000 subscribers in the region and approximately 80 employees, the local ISP Shore.net was recently acquired by PRIMUS Telecommunications Group. PRIMUS is a global-facilities-based total serve provider (TSP) offering e- commerce, Internet access, and data and voice services on a bundled basis.

Shore.net was attractive to PRIMUS for its success in the following areas: it provides broadband connectivity services to more than 30,000 small and medium-size enterprises and a limited number of residential customers in New England; it has its own high-capacity network that extends through

Massachusetts and New Hampshire with more than 100 POPs and extensive private peering with leading tier-1 carriers and ISPs; and it has the capability of offering clients advanced Web-hosting services on both Unix and NT platforms.32 Acquiring Shore.net will allow PRIMUS to initiate the expansion of its services nationally, targeting SMEs and high-growth “dot-com” companies.

Though strictly a private venture, this acquisition could have a potentially large and vital economic impact on Lynn and the surrounding communities. PRIMUS has already announced plans to construct a call center in Lynn, which will provide additional telecommunication services to local businesses and increase

31

Interview with Lynn city officials Peter Deveau, Hal McGaughey, and Stephen Harausz, and Lowell Gray of Shore.net, March 10, 1999.

32

employment in the local area. In addition, the presence of such a large

telecommunications firm could generate a snowball effect, encouraging other large companies to come into the city. Furthermore, development of an even stronger telecommunications infrastructure in Lynn has the far-reaching potential to increase the geographic radius of the telecommunications cluster now located along and within the Route128/95 beltway.